New Coalition divisions over public spending

Coalition divisions hardened today as Danny Alexander suggested that the Liberal Democrats would push for about £28 billion more in public spending than the Conservatives in the next parliament.

The Treasury Chief Secretary said his party would insist that spending must “grow with the economy” after the structural deficit is eradicated in 2017/18.

His intervention came after a weekend of sniping as the parties fought to take credit for the more popular parts of last week’s Autumn Statement.

There were even rumours of a high-profile ministerial resignation in the New Year by a Lib-Dem in a bid to highlight the differences between them and the Tory partners. Allies of Vince Cable, the Business Secretary, ruled him out of the speculation.

David Cameron lashed out at the Liberal Democrats for being “all over the place”. In an email to Tory MPs he claimed Nick Clegg’s troops would “prop up a failing Labour government”.

Mr Alexander hit back today by accusing the Conservatives of plotting an “ideological shrinking of the state” through cuts if they win the general election in May.

He came the closest yet to spelling out the size of the spending gap between the two Coalition parties, by saying the Liberal Democrats did not support reducing public spending as a proportion of GDP beyond 2017/18.

“What I think is the important thing is that beyond 2017/18 that we don’t go in for a sort of ideological path of shrinking the state, but instead that we allow public expenditure to grow with the economy,” Mr Alexander said. A spokesman for Mr Alexander refused to put figures on his comment, claiming it was impossible to calculate the size of the gap.

But Paul Johnson, of the independent Institute for Fiscal Studies, said a gap of about £28 billion was approximately right, based on official forecasts. Last week’s figures showed spending as a percentage of GDP will be 37 per cent in 2017/18 and set to fall to 35.2 per cent in 2019/20.

“The gap between the big parties is more substantial than anything we have seen since around 1992,” said Mr Johnson. MPs believe much of the recent Coalition friction has been “stage-fighting” planned by the Liberal Democrats to improve their image as a coalition partner punching their weight.

Mr Clegg said in an interview: “I do think the Conservatives now need to come clean because they are not being straightforward with people. How many colleges will be closed, how many primary schools will be closed, how many police will be taken off our streets, how many people who are in the working age poor will be hit by these plans?”

Mr Cameron hit back in his email: “The Liberal Democrats are all over the place, unable to decide whether they want to stick to the plan or veer off it.”